From April 2026, HMRC will make it compulsory to payroll employee benefits in kind and you will no longer be able to submit P11D forms. However, you can start payrolling before then as this has been in place for some years now.
How payrolling benefits in kind works
In practice, benefits are processed in the payroll via the employee’s payslip by adding the cash equivalent of the benefit to their taxable pay each pay period and calculating the tax on it. This means that employees pay their tax in real time.
With the traditional method of submitting P11D forms, this is always done in the subsequent tax year and the employee needs to wait for a tax code change before they can start repaying their tax.
Example: If an employee receives £1200 worth of health insurance per year, tax would be calculated on £100 each month (£1200/12 months) and paid via the employee’s payslip.
Individual P11D forms for the employee do not need to be submitted; only the P11D(b) form needs to be submitted with details of the Employer NIC.
What do you need to do to start payrolling benefits in kind?
If you would like to payroll benefits in kind, you or your agent will need to register this with HMRC before the start of the tax year you would like to payroll for. It is not necessary to register benefits each year – once registered they remain so unless they are deregistered.
This needs to be done via your online PAYE account.
Please note that before April 2026 you will still need to submit P11D forms for any benefits that are not payrolled.
